Foreign holdings of Egypt’s debt instrument exceed $20B by end of August

CAIRO – 9 August 2019: Minister of Finance Mohamed Ma’it said on Monday, Sept. 9 that foreign holdings of Egypt’s public debt instruments exceeded $20 billion by the end of August.

Ma’it added on the sidelines of Euromoney conference that Egypt is attracting many investors during the current period after the completion of the economic reform program.

In November 2016, the Executive Board of the IMF approved a $12 billion loan as a financial assistance to Egypt to support the Egyptian economic reform program.

Upon the board's approval in November, Egypt embarked on a bold economic reform program that included floating its currency, losing around 50 percent of its value as part of the economic reform program which imposed taxes, including the value-added tax (VAT), and cut energy subsidies, all with the aim of trimming the budget deficit.

The Central Bank of Egypt (CBE), on behalf of the Ministry of Finance, issued Monday LE 2.225 billion in treasury bonds. The T-bonds were offered in two installments, with the first valued at LE 1.25 billion with a five-year term and the second worth LE 1 billion with a 10-year term.

For the current fiscal year, the budget deficit is estimated to record LE 445.1 billion, or 7.2 percent, planned by the ministry to be financed through treasury bills and bonds and through international and Arab loans.

Foreign holdings of government debt instruments exceeded $17 billion by the end of May, and hit $19.2 billion by mid-June.

In August, the Monetary Policy Committee of the Central Bank of Egypt (CBE) cut the overnight deposit rate, the overnight lending rate, and the rate of the main operation by 150 basis points.

The overnight deposit rate, the overnight lending rate, and the rate of the main operation are cut to be at 14.25 percent, 15.25 percent, and 14.75 percent, which was higher than economists’ expectations.

A number of economists said the appeal of foreigners to Egyptian debt instruments would continue even after interest rates were cut.

Experts predict that interest rates on debt instruments will continue to fall due to falling interest rates, especially as they recorded a decline in their latest offer.

The Ministry of Finance aims to reduce the government debt to GDP ratio to 82.5 percent by the end of June 2020 and to 77.5 percent by the end of June 2022.